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BAILOUT? - New York Insurance Superintendent watching bond insurers, may intervene
- Thread starter Cdntrader
- Start date
On the conf call the cfo said "And again, we are, in fact, considering alternatives to the rights offering that we have discussed. But I have already said everything that I can say about."
he kept giving mixed signals about the right s offering. Maybe they already gave up on this, why are they waiting so much?its not like it exactly helps to wait since it will only make people more nervous and likely not to step in. I'm not sure if this offering is going through or not, the backstop commiment of warburg might still be there though but isnt that backstop not likely to be legal since it might give control of mbia to warburg and that requires shareholders approval?
he kept giving mixed signals about the right s offering. Maybe they already gave up on this, why are they waiting so much?its not like it exactly helps to wait since it will only make people more nervous and likely not to step in. I'm not sure if this offering is going through or not, the backstop commiment of warburg might still be there though but isnt that backstop not likely to be legal since it might give control of mbia to warburg and that requires shareholders approval?
Quote from Daal:
where you got this?
http://www.marketwatch.com/news/sto...x?guid={B63908A2-C148-4C04-A238-8B6EF7CFA3DB}
US Bank Regulators See Moderate Risks From Bond Insurers
WASHINGTON (AP) -- Turmoil in the bond insurance industry does pose a risk to banks and the broader markets, but the risk to the nation's largest banks may only be modest, according to letters from federal and state financial regulators to a U.S. House lawmaker.
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"Given the adverse effects that problems of financial guarantors can have on financial markets and the economy, we are closely monitoring developments," Federal Reserve Chairman Ben Bernanke said in a Feb. 4 letter to Rep. Paul Kanjorski, D-Pa.
The Office of the Comptroller of the Currency, which oversees large national banks, said the firms it supervises have both direct and indirect exposure to problems in the bond insurance industry. Still, the regulator said in its letter, the problem should be controllable.
"In general, based on information derived from onsite supervision at our banks, we believe that direct exposures from counterparty risk and direct lending are relatively moderate," the OCC letter said.
The letters were released Wednesday by Kanjorski's office. Kanjorski, who chairs the House Financial Services subcommittee with jurisdiction over the insurance industry, wrote to the Federal Reserve, Securities and Exchange Commission and some state insurance regulators last month asking about the risks posed by potentially massive losses by top firms such as MBIA Inc.
In a statement accompanying the letters Wednesday, Kanjorski said his subcommittee will hold a hearing on the bond insurance industry on Feb. 14.
"The comments of financial regulators about the problems affecting the bond insurance industry and the shortcomings of its current regulatory regime have convinced me of the real need to reform the oversight of this important sector of our financial system," Kanjorski said in a statement.
State regulators, who oversee insurance firms on a state-by-state basis, countered that the current regulatory environment has adequately dealt with the situation.
The news comes as rating agencies have either lowered, or threatened to lower, the coveted triple-A ratings of industry leaders. On Tuesday, Fitch Ratings warned it may downgrade its ratings of MBIA's bond insurance units as part of an industrywide evaluation.
At issue are the subprime mortgages underlying complex securities insured by bond insurance firms. As defaults on mortgages have continued to climb and the housing industry has faltered, projected losses on collateralized debt obligations backed by the mortgages have likewise increased.
That has sparked fears on Wall Street that the losses could lead to the collapse of firms like Ambac Financial Group Inc. and others. In response, major banks, brokerage firms and government officials have been discussing various proposals for rescuing the firms or helping them raise capital.
WASHINGTON (AP) -- Turmoil in the bond insurance industry does pose a risk to banks and the broader markets, but the risk to the nation's largest banks may only be modest, according to letters from federal and state financial regulators to a U.S. House lawmaker.
ADVERTISEMENT
"Given the adverse effects that problems of financial guarantors can have on financial markets and the economy, we are closely monitoring developments," Federal Reserve Chairman Ben Bernanke said in a Feb. 4 letter to Rep. Paul Kanjorski, D-Pa.
The Office of the Comptroller of the Currency, which oversees large national banks, said the firms it supervises have both direct and indirect exposure to problems in the bond insurance industry. Still, the regulator said in its letter, the problem should be controllable.
"In general, based on information derived from onsite supervision at our banks, we believe that direct exposures from counterparty risk and direct lending are relatively moderate," the OCC letter said.
The letters were released Wednesday by Kanjorski's office. Kanjorski, who chairs the House Financial Services subcommittee with jurisdiction over the insurance industry, wrote to the Federal Reserve, Securities and Exchange Commission and some state insurance regulators last month asking about the risks posed by potentially massive losses by top firms such as MBIA Inc.
In a statement accompanying the letters Wednesday, Kanjorski said his subcommittee will hold a hearing on the bond insurance industry on Feb. 14.
"The comments of financial regulators about the problems affecting the bond insurance industry and the shortcomings of its current regulatory regime have convinced me of the real need to reform the oversight of this important sector of our financial system," Kanjorski said in a statement.
State regulators, who oversee insurance firms on a state-by-state basis, countered that the current regulatory environment has adequately dealt with the situation.
The news comes as rating agencies have either lowered, or threatened to lower, the coveted triple-A ratings of industry leaders. On Tuesday, Fitch Ratings warned it may downgrade its ratings of MBIA's bond insurance units as part of an industrywide evaluation.
At issue are the subprime mortgages underlying complex securities insured by bond insurance firms. As defaults on mortgages have continued to climb and the housing industry has faltered, projected losses on collateralized debt obligations backed by the mortgages have likewise increased.
That has sparked fears on Wall Street that the losses could lead to the collapse of firms like Ambac Financial Group Inc. and others. In response, major banks, brokerage firms and government officials have been discussing various proposals for rescuing the firms or helping them raise capital.
Security Capital's Bond Insurer Cut to A3 From Aaa By Moody's
By Emma Moody
Feb. 7 (Bloomberg) -- Security Capital Assurance Ltd.'s bond insurance unit, hobbled by a decline in subprime mortgage securities, lost its Aaa credit rating at Moody's Investors Service.
XL Capital Assurance Inc. was cut six levels to A3, New York-based Moody's said today in a statement.
To contact the reporter on this story: Emma Moody at emoody@bloomberg.net
Last Updated: February 7, 2008 15:16 EST
By Emma Moody
Feb. 7 (Bloomberg) -- Security Capital Assurance Ltd.'s bond insurance unit, hobbled by a decline in subprime mortgage securities, lost its Aaa credit rating at Moody's Investors Service.
XL Capital Assurance Inc. was cut six levels to A3, New York-based Moody's said today in a statement.
To contact the reporter on this story: Emma Moody at emoody@bloomberg.net
Last Updated: February 7, 2008 15:16 EST
MBIA Sells $1 Billion in Shares at $12.15 to Save AAA Rating
By Christine Richard and Elizabeth Hester
Feb. 7 (Bloomberg) -- MBIA Inc., the world's biggest bond insurer, raised $1 billion by selling shares at $12.15 each in an effort to protect its AAA insurance rating.
The 82.3 million shares were sold at a 14 percent discount to Armonk, New York-based MBIA's $14.20 closing price today, according to data compiled by Bloomberg.
MBIA increased the sale from a planned $750 million, though accepted a lower price than it had anticipated. The sale matches the price private-equity firm Warburg Pincus LLC had agreed to pay to backstop the transaction in case no buyers could be found.
MBIA's plans were announced the same week that Fitch Ratings placed the company's AAA insurance ranking under review for a downgrade as losses increase on the type of subprime- mortgage debt that MBIA guarantees. If the offering is successful, MBIA will have raised about $2.25 billion since November.
A call to Liz James, a spokeswoman for MBIA, wasn't immediately returned.
In addition to selling $500 million of shares to Warburg Pincus, MBIA also sold $1 billion in surplus notes and cut its dividend by 62 percent.
Warburg Pincus purchased 16.1 million shares at $31 each on Jan. 30, adding another $500 million in capital to the company's coffers.
JPMorgan Chase & Co. and Lehman Brothers Holdings Inc. managed today's sale.
MBIA dropped 8 cents to $14.20 in New York Stock Exchange composite trading today.
To contact the reporter on this story: Christine Richard in New York at crichard5@bloomberg.net ; Elizabeth Hester in New York at ehester@bloomberg.net .
Last Updated: February 7, 2008 18:26 EST
By Christine Richard and Elizabeth Hester
Feb. 7 (Bloomberg) -- MBIA Inc., the world's biggest bond insurer, raised $1 billion by selling shares at $12.15 each in an effort to protect its AAA insurance rating.
The 82.3 million shares were sold at a 14 percent discount to Armonk, New York-based MBIA's $14.20 closing price today, according to data compiled by Bloomberg.
MBIA increased the sale from a planned $750 million, though accepted a lower price than it had anticipated. The sale matches the price private-equity firm Warburg Pincus LLC had agreed to pay to backstop the transaction in case no buyers could be found.
MBIA's plans were announced the same week that Fitch Ratings placed the company's AAA insurance ranking under review for a downgrade as losses increase on the type of subprime- mortgage debt that MBIA guarantees. If the offering is successful, MBIA will have raised about $2.25 billion since November.
A call to Liz James, a spokeswoman for MBIA, wasn't immediately returned.
In addition to selling $500 million of shares to Warburg Pincus, MBIA also sold $1 billion in surplus notes and cut its dividend by 62 percent.
Warburg Pincus purchased 16.1 million shares at $31 each on Jan. 30, adding another $500 million in capital to the company's coffers.
JPMorgan Chase & Co. and Lehman Brothers Holdings Inc. managed today's sale.
MBIA dropped 8 cents to $14.20 in New York Stock Exchange composite trading today.
To contact the reporter on this story: Christine Richard in New York at crichard5@bloomberg.net ; Elizabeth Hester in New York at ehester@bloomberg.net .
Last Updated: February 7, 2008 18:26 EST
http://www.cnbc.com/id/15840232?video=643829013&play=1
Gasparino on possible deal next week to bailout insurers.
Gasparino on possible deal next week to bailout insurers.
Monolines rescue efforts might be in vain By Aline van Duyn in New York
Thu Feb 7, 4:25 PM ET
MBIA (NYSE:MBI), the world's biggest bond insurer, has started the process of selling just over 50m of new shares, hoping this will raise $750m in fresh capital.
ADVERTISEMENT
Once completed, the share issue could give MBIA enough funds to withstand further potential losses related to guarantees it has given on mortgage-backed securities in order to maintain its top triple-A credit rating.
Or it could not.
Unfortunately, the question of whether the extra capital will be enough is close to impossible to answer with any certainty.
"The company does not know, the ratings agencies do not know and banks with exposure to MBIA do not know how much extra capital is needed to protect the triple-A rating," says a banker involved in capital-raising efforts.
"And no one knows this about any of the other bond insurers either."
The uncertainty hanging over the fate of bond insurers such as MBIA, Ambac, FGIC and others has incr_eased in the past week.
Assumptions for losses related to mortgages originated as recently as last year or the year before have escalated.
Still, it is not clear whether the high levels of foreclosures could rise further.
Just over a week ago, Moody's Investors Service said losses on loans made in 2006 backing residential mortgage-backed securities had been revised upwards and could reach 14 to 18 per cent.
This is not the worst case scenario, though. Further declines in house prices could raise losses to more than 30 per cent, Moody's said.
Standard & Poor's revised its loss assumptions to 19 per cent from 14 per cent. Fitch Ratings said losses from subprime mortgage originated in 2006 and 2007 were expected to reach 21 per cent and 26 per cent respectively.
"With the rating agencies moving the mark further out with the passing of each month, we believe there is still the risk that MBIA could be downgraded by one or more rating agencies," says Tamara Kravec, analyst at Bank of America.
What happens if MBIA and its peers are downgraded?
Some banks will have to take further writedowns related to their exposure to risky mortgage loans. Already such writedowns have exceeded $125bn on a global basis, and fears that the financial sector might have further troubles to absorb is hampering the performance of the stock market and leading to concerns of a recession in the US.
The banks with the biggest exposures to Ambac, MBIA and ACA (a smaller bond insurer already on the brink of insolvency) are Merrill Lynch, Citigroup (NYSE:C) and UBS (NYSE:UBS), according to research by Oppenheimer. The fund manager estimates the exposures to range from $7.4bn to $11.8bn for Merrill, $6.5bn to $10.3bn for Citi and $5.4bn to $8.7bn for UBS.
"Additional writedowns could be as large as $70bn, but would more likely be roughly $40bn throughout 2008," says Meredith Whitney, analyst at Oppenheimer.
"Because we estimate that almost half of this risk is concentrated among three financial institutions with the remainder broadly distributed among many, there is no systemic risk at hand."
This week S&P said losses for banks would come mainly through the hedging arrangements that the bond insurers had provided on the least risky tranches of collateralised debt obligations - complex debt structures backed by assets such as subprime mortgages. These hedges total about $125bn.
According to people familiar with talks aimed at rescuing bond insurers - which are being spearheaded by Eric Dinallo, New York state insurance superintendent, and encouraged by regulators such as the US Federal Reserve - banks such as Merrill Lynch are trying to calculate whether it is in their interests to put funds into bond insurers.
If an infusion can prop up the triple-A rating and help banks avoid the need for accounting losses, it might be worthwhile. But if the banks put their money in and then the bond insurers lose their triple-A ratings a month or two later, which would result in writedowns anyway, it could be damaging to their reputations.
The lack of healthy bond insurers could hamper efforts by US municipalities to raise funds. Many municipal borrowers have relied on the triple-A guarantees to boost their credit ratings.
There are, however, still some strong bond insurers, such as FSA, which have not been exposed to subprime assets, and new entrants are coming such as Warren Buffett's Berkshire Hathaway.
Next week, on Thursday, the US Congress will hold a hearing to debate the problems and risks related to bond insurers, highlighting the plethora of borrowers, investors and banks that have a stake in the bond insurance industry.
Congressman Paul Kanjorski, chairman of the subcommittee on capital markets, says he is convinced "of the real need to reform the oversight" of the bond insurance sector.
"Problems created by unrest in the bond insurance markets go to the heart of our economy and the very vitality of municipal fin_ance," he says.
But an increase in regulatory oversight might come too late. What really matters is trying to figure out where the subprime problems end.
"No one knows when the subprime mess is going to hit bottom. And until it does, no rating of any bond insurer is safe," says Donald Light, senior analyst with Celent, a financial research and consulting firm.
"This drama will continue well into the second half of this year."
Thu Feb 7, 4:25 PM ET
MBIA (NYSE:MBI), the world's biggest bond insurer, has started the process of selling just over 50m of new shares, hoping this will raise $750m in fresh capital.
ADVERTISEMENT
Once completed, the share issue could give MBIA enough funds to withstand further potential losses related to guarantees it has given on mortgage-backed securities in order to maintain its top triple-A credit rating.
Or it could not.
Unfortunately, the question of whether the extra capital will be enough is close to impossible to answer with any certainty.
"The company does not know, the ratings agencies do not know and banks with exposure to MBIA do not know how much extra capital is needed to protect the triple-A rating," says a banker involved in capital-raising efforts.
"And no one knows this about any of the other bond insurers either."
The uncertainty hanging over the fate of bond insurers such as MBIA, Ambac, FGIC and others has incr_eased in the past week.
Assumptions for losses related to mortgages originated as recently as last year or the year before have escalated.
Still, it is not clear whether the high levels of foreclosures could rise further.
Just over a week ago, Moody's Investors Service said losses on loans made in 2006 backing residential mortgage-backed securities had been revised upwards and could reach 14 to 18 per cent.
This is not the worst case scenario, though. Further declines in house prices could raise losses to more than 30 per cent, Moody's said.
Standard & Poor's revised its loss assumptions to 19 per cent from 14 per cent. Fitch Ratings said losses from subprime mortgage originated in 2006 and 2007 were expected to reach 21 per cent and 26 per cent respectively.
"With the rating agencies moving the mark further out with the passing of each month, we believe there is still the risk that MBIA could be downgraded by one or more rating agencies," says Tamara Kravec, analyst at Bank of America.
What happens if MBIA and its peers are downgraded?
Some banks will have to take further writedowns related to their exposure to risky mortgage loans. Already such writedowns have exceeded $125bn on a global basis, and fears that the financial sector might have further troubles to absorb is hampering the performance of the stock market and leading to concerns of a recession in the US.
The banks with the biggest exposures to Ambac, MBIA and ACA (a smaller bond insurer already on the brink of insolvency) are Merrill Lynch, Citigroup (NYSE:C) and UBS (NYSE:UBS), according to research by Oppenheimer. The fund manager estimates the exposures to range from $7.4bn to $11.8bn for Merrill, $6.5bn to $10.3bn for Citi and $5.4bn to $8.7bn for UBS.
"Additional writedowns could be as large as $70bn, but would more likely be roughly $40bn throughout 2008," says Meredith Whitney, analyst at Oppenheimer.
"Because we estimate that almost half of this risk is concentrated among three financial institutions with the remainder broadly distributed among many, there is no systemic risk at hand."
This week S&P said losses for banks would come mainly through the hedging arrangements that the bond insurers had provided on the least risky tranches of collateralised debt obligations - complex debt structures backed by assets such as subprime mortgages. These hedges total about $125bn.
According to people familiar with talks aimed at rescuing bond insurers - which are being spearheaded by Eric Dinallo, New York state insurance superintendent, and encouraged by regulators such as the US Federal Reserve - banks such as Merrill Lynch are trying to calculate whether it is in their interests to put funds into bond insurers.
If an infusion can prop up the triple-A rating and help banks avoid the need for accounting losses, it might be worthwhile. But if the banks put their money in and then the bond insurers lose their triple-A ratings a month or two later, which would result in writedowns anyway, it could be damaging to their reputations.
The lack of healthy bond insurers could hamper efforts by US municipalities to raise funds. Many municipal borrowers have relied on the triple-A guarantees to boost their credit ratings.
There are, however, still some strong bond insurers, such as FSA, which have not been exposed to subprime assets, and new entrants are coming such as Warren Buffett's Berkshire Hathaway.
Next week, on Thursday, the US Congress will hold a hearing to debate the problems and risks related to bond insurers, highlighting the plethora of borrowers, investors and banks that have a stake in the bond insurance industry.
Congressman Paul Kanjorski, chairman of the subcommittee on capital markets, says he is convinced "of the real need to reform the oversight" of the bond insurance sector.
"Problems created by unrest in the bond insurance markets go to the heart of our economy and the very vitality of municipal fin_ance," he says.
But an increase in regulatory oversight might come too late. What really matters is trying to figure out where the subprime problems end.
"No one knows when the subprime mess is going to hit bottom. And until it does, no rating of any bond insurer is safe," says Donald Light, senior analyst with Celent, a financial research and consulting firm.
"This drama will continue well into the second half of this year."